‘How South Africa Works and Must Do Better’ (Pan Macmillan, available at book stores or through Amazon.co.za) has recently been launched in South Africa.
The book argues that the overwhelming challenge that South Africa faces, and has to date failed to deal with, is unemployment. With one in three South Africans unemployed, if this situation is not addressed, it will not only be impossible to sustainably lift many millions of people out of poverty, but the challenge of nation-building will inevitably prove fraught.
It would be churlish to deny the tremendous achievements since 1994 despite the terrible apartheid inheritance. Yet South Africa’s growth record has been poor by comparison not only to expectations, but of the record of other countries 21 years into their ‘independence’. Whereas South Africa’s per capita GDP rose by 30 percent in real terms between 1994 and 2015, Singapore’s growth was nearly 400 percent or Botswana’s 600 percent.
While the social welfare system has provided emergency assistance to the poorest and most vulnerable of South Africans, the sustainability of this approach is questionable. This especially concerns the social impact of having two societies: those with a job and those on welfare, where, as the National Development Plan admits, the longer one does not have a job the less likely one is to secure one. And while government has expanded the size of the civil service, for reasons both of governance and financial redistribution, this has created an intolerable fiscal drain and has served to price people out of jobs in the private sector.
The pattern of labour volatility, greater today than during the era of rolling mass action in the early 1990s, suggests too that the Tripartite Alliance is not working effectively to manage this relationship.
‘How South Africa Works and Must Do Better’ examines the challenges and opportunities across key productive sectors illustrative of the policy challenges that South Africa’s leaders face. It scrutinises the social grant and education systems to understand if South Africa has established mechanisms where people can not only escape destitution but be ready to be employed and identifies steps that some of South Africa’s most exciting entrepreneurs have taken to build world-class enterprises.
We believe that government must take the leading role in South Africa’s pivot to competitiveness. Without significant changes in the way government works, the economy will continue to underperform. Among the critical steps that government must take are:
- Develop a laser-like focus on growth and employment. To structurally transform South Africa’s economy, every government action must be evaluated by the measure of whether growth and employment are enhanced. Accordingly, we also believe that BEE and other associated redistributive measures have probably reached the limit of what they can accomplish, and are inflating the costs to the economy at the expense of many for the benefit of a few.
- Incentivise employment by limiting minimum wage increases and making it easier for employers to fire and redeploy workers. Our interviews indicate that employers across the country are currently petrified to hire workers because of labour legislation. As a result, they are more likely to use machines and robots; and robots don’t go on strike.
- Fix the state-owned enterprises and firms that the state invests in. ESKOM’s problems are well-known, although South Africans are not fully aware that the country is one of the few in the world where the electricity supply is less reliable than it was twenty years ago. Similarly, we believe that South African Airways’ mission must be refocused to bring as many tourists into the country as possible.
- Address many of the unexpected (and sometimes unintended) consequences of legislation that emerge at the local level after legislation is adopted in Pretoria. Too often, how legislation is interpreted leads to job-killing actions. The visa policy, for instance, whatever the motivation for its promulgation, has had the effect of severely damaging the tourist sector. The quicker it is revoked, the clearer will be government’s commitment to actually supporting a sector that generates a large number of jobs. Why, after all, constrain the access of those wanting to spend money in South Africa?
- Finally, fix the education system in the country so that employers can actually find and hire skilled workers. Across the country, whether people agree with us or not on many points, there is almost universal dissatisfaction with the education system. It is not so much a question of spending more as getting a better return, especially by demanding more of teachers.
However, the responsibility is not government’s alone. Business and labour also have a role to play. We sense at the moment some collusion between big business and big labour around the high wage economy. Big business can cope with high wages by employing fewer workers and big labour’s members benefit from high salaries. The losers are small- and medium-size businesses and the unemployed. Among the steps that business must take are:
- Develop a longer term perspective on relations with workers. Employers get the work force they deserve. Those employers who invest in employees and communities garner high productivity.
- Promote skill acquisition. Employers must help train workers to participate in the twenty-first century economy.
- Find a better way to communicate with government. Despite numerous fora, we find that business and government talk right past each other on critical issues.
Finally, labour has to realise that, while protecting the interests of union members, its actions have collateral effects on the economy. Or as one respondent told us, no one is going to invest in an economy that has five month strikes. And it is in the unions’ best interests to create more jobs, since that way it refreshes its membership.
South Africa faces considerable economic and social challenges. But it should take heart. These challenges are not as great as the tremendous difficulties the country has already overcome in its transition from apartheid to democracy and economic isolation to global integration 21 years ago. But we also know from international experience that the longer it takes to fix problems, the more difficult the recovery. South Africans, led by government, should act now to address the scourge of unemployment.
Dr Herbst heads the Newseum in Washington, Dr Mills the Johannesburg-based Brenthurst Foundation. ‘How South Africa Works and Must Do Better’ is, in part, the product of a fellowship Dr Mills enjoyed at the S Rajaratnam School in 2014.